Journey Energy Inc. Generates $20.4 Million In Adjusted Funds Flow For The First Quarter Of 2022, Increases Guidance


CALGARY, AB, May 9, 2022 /CNW/ – Journey Energy Inc. (TSX: JOY) (OTCQX: JRNGF) (“Journey” or the “Company“) announces its financial results for the first quarter of 2022.  The complete set of financial statements and management discussion and analysis for the periods ended March 31, 2022 and 2021 are posted on www.sedar.com and on the Company’s website www.journeyenergy.ca.

Highlights for the year-to-date are as follows:

  • Produced 8,492 boe/d in the first quarter. (53% natural gas production; 37% crude oil; 10% NGL’s). Almost all of Journey’s production is currently unhedged. Year-over-year production volumes increased 12%.
  • Realized adjusted funds flow of $20.4 million or $0.42 per basic share and $0.36 per diluted share.
  • Reduced net debt by 55% from $85.6 million at the end of the first quarter of 2021 to $38.5 million at March 31, 2022.
  • Closed a Canadian Development Expense flow-through-share financing of 2.5 million shares at $4.25/share for gross proceeds of $12.1 million.
  • Closed the acquisition of a private company in the Carrot Creek area effective April 1, 2022, adding approximately 625 boe/d of low decline production (54% crude oil and NGL’s).
  • Initiated the 2022 capital program with the drilling of 3 (3.0 net) wells in Skiff. These wells are on primary production with waterflood implementation scheduled for later in the year. In addition to Skiff one new well (31% WI) was drilled and completed on the acquired assets. This well is now on production at a restricted rate of 115 boe/d net to Journey’s working interest. The impact of first quarter activities has increased current production levels to 9,400 boe/d (46%) crude oil and NGL’s, an 11% increase over first quarter average production. In March and April of 2022 Journey drilled two, 1.5 mile horizontal wells in the Crystal light oil pool. These wells will be completed in June and are expected to be brought on-production early in the third quarter.
  • Closed the previously announced acquisition of infrastructure and gathering facilities in the Gilby area on May 9, 2022 for $5 million before closing adjustments. Journey has applied to install its second power generation facility, which will be located in Gilby. In anticipation of this, Journey has proactively acquired 8.4 megawatts (3 X 2.8 megawatt units) of generation capacity. These generators are currently in the process of being transported to the Gilby site. In order to account for the delivered purchase price of these units and for the preliminary design engineering for the project, Journey has added $3.3 million to the power generation component of the 2022 capital budget. Since the currently anticipated on-stream date for this project will be in 2023, the added capital will not impact production or cash flow guidance for 2022.
  • Produced 7,550 megawatts of electricity at Journey’s electricity generation facility in Countess, Alberta at an average price of $111/MWH. The run-rate during the first quarter was 88% of capacity.

Three months ended

 March 31,

Financial ($000’s except per share amounts)

2022

2021

%

change

Production revenue

45,858

23,575

95

Net income

13,769

1,699

710

    Per basic share

0.28

0.04

600

    Per diluted share

0.25

0.04

525

Adjusted Funds flow

20,401

8,712

134

    Per basic share

0.42

0.20

110

    Per diluted share

0.36

0.18

100

Cash flow from operations

21,811

4,295

408

    Per basic share

0.45

0.10

350

    Per diluted share

0.39

0.09

333

Net capital expenditures

12,162

465

2,515

Net debt

38,481

85,581

(55)

Share Capital (000’s)

Basic, weighted average

50,912

44,001

16

Basic, end of period

50,912

44,001

16

Fully diluted

59,272

52,504

13

Daily Sales Volumes

Natural gas (Mcf/d)

    Conventional

22,836

19,429

18

    Coal bed methane

4,163

5,083

(18)

Total natural gas volumes

26,999

24,512

10

Crude oil (Bbl/d)

    Light/medium

2,531

2,160

17

    Heavy

629

710

(11)

    Total crude oil volumes

3,160

2,870

10

Natural gas liquids (Bbl/d)

832

622

34

Barrels of oil equivalent (boe/d)

8,492

7,577

12

Average Realized Prices

Natural gas ($/mcf)

4.74

3.00

58

Crude Oil ($/bbl)

104.80

57.37

83

Natural gas liquids ($/bbl)

60.59

38.16

59

Barrels of oil equivalent ($/boe)

60.00

34.57

74

Operating Netback ($/boe)

Realized prices (excl. hedging)

60.00

34.57

74

    Royalties

(10.63)

(3.71)

187

    Operating expenses

(17.40)

(14.46)

20

    Transportation expenses

(0.51)

(0.44)

16

Operating netback

31.46

15.96

97

OPERATIONS

Journey was active during the fourth quarter of 2021 and to date in 2022, conducting accretive acquisitions, and also entering into two significant farm-ins.  These farm-ins provide optionality on over 19,000 acres of undeveloped land.  These transactions, along with the recently closed equity financing are helping to shape the 2022 capital program. This program will see Journey participating in 17 gross (16 net) wells in eight different areas.

Journey has expanded the exploration and development (“E&D”) portion of the 2022 capital program from $43 million to $54 million.  The difference includes $3.9 million due to cost escalations; $3.8 million in additional E&D projects; and $3.3 million allocated to future power generation projects.  The additional E&D projects include an additional Belly River oil well in Westerose along with waterflood expansion projects in Matziwin and Westerose.  Journey has made application to install its second power generation facility, which will be located in Gilby.  Journey has proactively acquired 8.4 megawatts (3 X 2.8 megawatt units) of generation capacity and is currently in the process of transporting these generators to Gilby.  In order to account for the delivered purchase price of these units and for the preliminary design engineering for the project, Journey has added $3.3 million to the power generation component of the 2022 capital budget.  Since the on- stream date for this project is currently expected to be in 2023, the added capital will not impact production or cash flow guidance for 2022.

In the first quarter Journey participated in 3 (3.0 net) wells in Skiff. These wells are on primary production with waterflood implementation scheduled for later in the year.  In addition, one well (31% WI) was drilled and completed on the acquired assets in Carrot Creek.  This well is now on-production at the restricted rate of 115 boe/d net to Journey’s working interest. The impact of first quarter drilling activities has increased current production levels to 9,400 boe/d (46% crude oil and NGL’s), representing an 11% increase over the first quarters’ average production.  In March and April of 2022 Journey also drilled two, 1.5 mile long horizontal wells in the Crystal light oil pool.  These wells are expected to be completed in June and brought on-production early in in the third quarter.  In late June Journey’s drilling program will continue in Westerose with two Belly River horizontal wells and one, two-mile Glauconite horizontal well.  Following this, Journey’s development drilling program will continue with wells in Cherhill, Matziwin, Herronton, and Brooks.

Journey is currently planning to drill 17 (16 net) wells in 2022 with locations evenly distributed between the Northern and Southern core areas.  Journey’s production guidance reflects the fact that the capital program is weighted to the second half of 2022, with only 40% of capital expenditures occurring in the first half of 2022, and many of the first half projects not coming on until the third quarter.  Because of this phasing, increasing capital has a muted impact on 2022 average production levels.  However, exit rates are expected to increase to 10,500 – 11,000 boe/d by the end of the year, an increase of about 1,000 boe/d from the March 23 guidance.  Journey’s 2022 capital program is expected to be funded from the combination of Adjusted Funds Flow and the flow-through financing, which closed on March 18, 2022.

Journey has been and continues to be active in evaluating opportunities to expand its business. The increase in commodity prices and the recent financing will provide Journey the opportunity to meet all of its debt obligations along with the potential to expand the business plan through acquisitions or additional exploration and development projects.

FINANCIAL

Strength in all commodity prices continued their upward trajectory into the first quarter of 2022. Commodity prices increased throughout the first quarter with the highest pricing achieved in March.  This resulted in first quarter Adjusted Funds Flow weighted to the latter part of the quarter.   Average Journey realized prices were $60.00/boe for the first quarter.  This was 74% higher than the same quarter of 2021 and a 19% appreciation from the fourth quarter of 2021.  Realized crude oil prices during the first quarter averaged $104.80/bbl, which was 83% higher than the $57.37/bbl realized in the first quarter of 2021.  Crude oil sales volumes for the first quarter of 2022 represented 37% of total boe volumes but contributed 65% of total petroleum and natural gas revenues.  Similarly, natural gas prices were 58% higher in the first quarter to average $4.74/mcf as compared to $3.00 in the first quarter of 2021.  Natural gas sales volumes contributed 53% of total boe sales volumes in 2022 while contributing 25% of total sales revenues.  Journey remained unhedged throughout 2022 to date and took full advantage of the commodity price appreciation that took place throughout 2021 and 2022.

All of the field operating costs (royalties, operating and transportation expenses) experienced increases during the first quarter of 2022.  Royalty expense was higher by 221% from the first quarter of 2021 as was expected with the strong appreciation in commodity prices.  On a per boe basis royalty expense was $10.63/boe in 2022 as compared to $3.71 in the first quarter of 2021.  Field operating expenses increased in 2022 as the acquisitions, workovers, reactivations, higher power prices, plant turnarounds and general inflationary pressures contributed to the total increase.  In addition, $0.9 million of workover and turnaround costs were incurred in the first quarter of 2022 and accounted for approximately $1.18/boe of the total operating expenses on a per boe basis.  As a result of these cost pressures, Journey averaged $17.40/boe for operating expenses in the first quarter of 2022 as compared to $14.46/boe in the same quarter of 2021.

Journey’s general and administrative (“G&A”) costs were higher in 2022 as compared to the same quarter in 2021 as Journey returned its staff to a full work week in the fourth quarter of 2021.  G&A increased to $2.4 million in the first quarter of 2022 as compared to $466 thousand in the first quarter of 2021.  2022 G&A includes one-time severance obligations of $570 thousand while 2021 G&A was lower as government COVID subsidies for rent and wages were still in existence during the first quarter of 2021.  On a per boe basis, Journey’s general and administrative costs were $3.15/boe for the first quarter of 2022 and $0.68/boe for the first quarter of 2021.  Journey is currently expecting that the G&A cost per boe for the entire year will be between $2.30 and $2.40.

Finance expenses related to borrowings, or interest costs, decreased by 20% to $1.6 million in the first quarter of 2022 from $2.0 million in the same quarter of 2021.  Average, interest-bearing debt decreased by 19% in the first quarter of 2022 compared to the same quarter of 2021 mainly due to the repayment of $25.0 million of the AIMCo term debt throughout 2021.

Journey realized net income of $13.7 million in the first quarter of 2022 and $1.7 million for the same quarter of 2021.  Commensurate with the higher commodity prices realized throughout 2022 the net income rose accordingly.  Net income per basic and diluted per share was $0.28 and $0.25 respectively for the first quarter.  Adjusted Funds Flow in the first quarter was 134% higher in 2022, wherein the Company generated $20.4 million, or $0.42 and $0.36 per basic and diluted share as compared to $8.7 million, or $0.20 basic and $ 0.18 per diluted per share in the same quarter of 2021.  Cash flow from operations was $21.8 million in the first quarter of 2022 ($0.45 per basic share and $$0.39 per diluted share) as compared to $4.3 million in the first quarter of 2021 or $0.10 and $0.09 per basic and diluted share respectively.

Prudence in capital spending meant that the Company underspent its cash flow as Journey continued to strengthen the balance sheet coming out of the most challenging year in its history in 2020.  The Company commenced a drilling program in the first quarter which included 4 (4.0 net) wells.  Total capital expenditures were $12.2 million which included the drilling and completion of 3 (3.0 net) wells in Skiff and the drilling of 1 (1.0 net) well in Crystal.  The three Skiff wells were placed on production late in March and therefore did not have a meaningful contribution to the production volumes nor the Adjusted Funds Flow for the first quarter.  Journey exited the first quarter of 2022 with net debt of $38.5 million, which was 55% lower than the $85.6 million at March 31, 2021 and 33% lower than at the end of 2021.  The $38.5 million of net debt at March 31, 2022 amounts to 0.5 times trailing annualized first quarter Adjusted Funds Flow.  Journey is currently expecting that its existing cash balance plus the projected cash flows from operations will be more than sufficient for the Company to meet its term debt maturity of $23.8 million on September 30 of this year.

OUTLOOK & GUIDANCE

With the assistance of rising commodity prices and prudent capital spending, Journey made significant progress in reducing its net debt throughout 2021 and during the first quarter of 2022.  To date in 2022 Journey has drilled 4 (4.0 net) wells and the plans are to drill 17 (16.0 net) wells for the entire year.  The recently closed flow-through share financing will go towards funding this year’s drilling program.  In addition, the previously announced corporate acquisition ($8 million cash plus $11 million equity) was closed effective April 1, 2022.  Current production from this acquisition is approximately 760 boe/d (54% light crude oil and NGL’s). Furthermore, on May 9, 2022 the previously announced infrastructure acquisition was closed. The cash expended in closing the infrastructure deal was $4.8 million.

Pricing remained high in April with a minor decrease in crude oil and NGL prices being more than offset by increasing natural gas prices. Both pricing and sales volume growth are supportive of higher Adjusted Funds Flows in the second quarter versus the first quarter, leading to upward revisions to Journey’s guidance.  The Board of Directors has approved an increase to Journey’s 2022 capital budget to $78 million, which includes E&D activities, spending for future power generation projects and A&D activity. The updated 2022 guidance, which includes the production and Adjusted Funds Flow from the acquisitions is presented in the table below:

Revised

Previous (Mar. 23/22)

Annual average daily sales volumes

9,400 – 10,000 boe/d (47% crude oil and NGL)

9,100 – 9,600 boe/d (47% crude oil and NGL)

Adjusted Funds Flow

$103 – $109 million

$87 – $91 million

Adjusted Funds Flow per basic share

$2.00 – $2.09

$1.68 – $1.78

E&D capital spending

$51 million

$43 million

Power asset capital spending

$3 million

Nil

Capital spending (A&D):

Cash portion

Equity portion

$13 million

$11 million

$13 million

$9 million

Year-end net debt

$4 – $10 million

$7 – $12 million

Commodity prices:

WTI (USD $/bbl)

MSW oil differentials (USD $/bbl)

AECO natural gas (CAD $/mcf)

CAD/USD foreign exchange

$94.00

$4.00

$5.45

$0.78

$87.50

$4.00

$4.00

$0.79

Over the course of 2022, we look forward to updating you on Journey’s progress.

Annual General Meeting

Journey’s annual general meeting (“AGM” or the “Meeting”) is scheduled for 3:00 pm (Calgary time) on May 26, 2022.  In response to the COVID-19 pandemic, Journey is discouraging physical attendance at the Meeting and has decided to offer shareholders an opportunity to listen to the business to be conducted at the Meeting by teleconference. Shareholders not attending in person must vote on the matters not less than forty-eight (48) hours (excluding Saturdays, Sundays and statutory holidays in the Province of Alberta) before the time of the Meeting.  Further instructions on how to listen to the Meeting and how to vote in advance of the Meeting will be found in Journey’s management information circular that will be posted on the Company’s website and on SEDAR in due course.  In line with Journey’s commitment to safety, in-person attendance by directors and senior management of Journey will be limited and will be subject to the orders, limitations, advice and guidance of the federal and provincial health ministries and other governmental authorities.  Accordingly, Journey expects to only have a minimum number of in-person attendees present to conduct the formal business of the Meeting and does not intend to provide a corporate presentation after the Meeting.

One of Journey’s current directors, Mr. Dana Laustsen, will be retiring from the Board effective at the AGM.  Journey would like to thank Mr. Laustsen for his guidance, advice and experience throughout the eight years he spent with Journey and we wish him well in his future endeavors.  Journey has put forward one new director to stand for election at the AGM, Mr. Scott Treadwell.  Please see the information circular filed on SEDAR for Mr. Treadwell’s full biography.

About the Company

Journey is a Canadian exploration and production company focused on conventional, oil-weighted operations in western Canada. Journey’s strategy is to grow its production base by drilling on its existing core lands, implementing water flood projects, executing on accretive acquisitions.  Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with water floods.

You can read more of the news on source

Related posts